Two Tampa companies accused of selling 'virtually worthless' health insurance plans to hundreds of thousands of consumers nationwide

TAMPA — In 2016, Chris Mitchell began paying $206 a month for a health insurance plan that a sales agent claimed would cover everything from doctors visits to lab work to surgery and hospital stays.

When the Kansas man needed cancer surgery last year, however, he discovered that the plan had severe limitations. Mitchell had to use his credit card to make an upfront payment to the hospital, and after surgery received more than $40,000 in bills, much of which he stills owes.

Now, a class-action complaint alleges that Mitchell and thousands of others nationwide were victims of a fraudulent scheme by a group of Florida companies — including two based in Tampa — that led consumers to believe they were getting major medical insurance when they actually were sold plans that didn't comply with the Affordable Care Act.

The complaint, filed this month in federal court in Miami, says that Tampa-based Health Insurance Innovations Inc. and Health Plan Intermediaries Holdings LLC developed "limited benefit indemnity plans'' and paid millions of dollars to a South Florida company, Simple Health, to develop the sales pitch used to lure consumers.

Health Insurance Innovations, which trades on the NASDAQ under the symbol HIIQ, released a statement Thursday saying the allegations have no merit and that Simple Health misled it through "deceitful practices'' that included editing recorded sales calls.

"HIIQ requires third-party agents to provide clear disclosure of the information necessary for consumers to understand the policies they purchase,'' the company said. "Simple Health Violated the trust of its customers, its regulators and us.''

The alleged scheme "defrauded that vulnerable group of Americans who do not have comprehensive medical insurance,'' the complaint says. "Consumers were told, through a uniform script read to them by Simple Health's sales agents, a set of lies and omissions that included, among other falsehoods, the misrepresentation that they were purchasing a (comprehensive plan) from a reputable, 'A-rated' insurance carrier. In truth, consumers received virtually worthless limited indemnity plans and medical discount plans.''

READ MORE: Why is Florida bucking the trend? Obamacare signups are up, not down.

The 2010 Affordable Care Act, often called Obamacare after the president who backed it, required almost everyone to be covered by health insurance that provides minimum essential coverage — emergency services, hospitalization etc. — or face a tax penalty. The Trump administration, which opposes the act, has relaxed rules to allow for cheaper policies that critics claims are not real insurance.

The complaint was filed by Mitchell, an advocate for the homeless in Kansas, and Elizabeth Belin of Ohio, on behalf of as many as 500,000 consumers who bought the limited policies.

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According to the complaint, Belin was suffering from a knee injury when she began looking in early 2016 for insurance compliant with the Affordable Care Act. She found one of Simple Health's web sites, which had misleading names like "Obamacare-healthqoutes.com'' and "healthinsurance 2017 deadline.com.''

Reading from a script that began "I am going to help you with your application for an affordable health insurance quote,'' an agent told Belin that he would shop among several comprehensive plans to find the best one for her at the best price. He put her on hold, them came back with "great news'' that he had found a plan that would cover the majority of costs for her knee problem.

Belin paid a $155 enrollment fee and $238 a month. But when she had knee replacement surgery in 2017, she discovered that the plan paid for only a small fraction of her surgery and related expenses and that she still owed $48,000 to the hospital plus at least $7,600 in other costs. She was forced to cancel a second, scheduled knee operation.

The complaint says Health Insurance Innovations paid Simple Health about $180 million in commissions to pitch its plans to consumers like Belin. Started in 2008, the Tampa company had revenues last year of $351.1 million, of which nearly $160 million came from the sale of limited benefit pans. The company receives money from its co-defendant, Health Plan Intermediaries Holdings, to pay taxes and other expenses, the complaint says.

At 11 a.m. Heath Innovations shares were down $2.50 to $26.67.

Contact Susan Taylor Martin at smartin@tampabay.com or (727) 893-8642. Follow @susanskate.